U.S. Stocks Slide as Twitter Leads Selloff in Technology

May 6 (Bloomberg) -- U.S. stocks fell for the third time in
four days as Twitter Inc. led a selloff in Internet shares while
American International Group Inc. dragged down financial
companies.

Twitter plunged 18 percent as about 480 million shares from
insiders became eligible for sale, more than quadrupling the
current amount available for trading. The Dow Jones Internet
Composite Index tumbled 3 percent, with Netflix Inc. and
Amazon.com Inc. falling more than 4.1 percent. AIG declined 4.1
percent after saying rising claims costs contributed to a 27
percent drop in profit. Yahoo! Inc. gained 1.2 percent in after-hours trading as Alibaba Group Holding Ltd. filed for what could
become the largest U.S. initial public offering ever.

The Standard & Poor’s 500 Index retreated 0.9 percent to
1,867.72 at 4 p.m. in New York for the biggest loss in more than
three weeks. The Nasdaq Composite Index slumped 1.4 percent. The
Dow Jones Industrial Average fell 129.53 points, or 0.8 percent,
to 16,401.02.

“It seems the market is heavy,” Bill Schultz, chief
investment officer who oversees about $1.1 billion at McQueen
Ball & Associates in Bethlehem, Pennsylvania, said in a phone
interview. “You have more of the slightly riskier stocks that
have run into trouble here, in particular tech and biotech.
Today, the financials are under pressure.”

The Bloomberg IPO Index, tracking stocks including Twitter,
slumped 2.3 percent. The gauge for newly public companies has
dropped 10 percent from its March peak as investors shifted out
of the fastest-growing industries and sought safety in firms
with stable earnings and dividends.

The Dow Jones Internet Index extended its decline from a
March peak to 18 percent. The Russell 2000 Index of smaller
companies fell 1.6 percent, closing below its 200-day moving
average for the first time since 2012. The Nasdaq Biotechnology
Index slipped 1.7 percent, bringing its loss from a February
high to 16 percent.

Twitter tumbled 18 percent to $31.85, the lowest level
since debuting in November, as more shares became available from
insiders who got their first chance to sell since the company’s
initial public offering. The decline came even as early
investors including Chris Sacca and Rizvi Traverse Management
LLC pledged not to sell.

Yelp, Pandora

Other Internet stocks were punished. Yelp Inc. slid 13
percent, the most since November 2012, while Pandora Media Inc.
lost 8.9 percent after plunging 17 percent on April 25. LinkedIn
Corp. decreased 5.7 percent while Angie’s List Inc. fell more
than 4 percent.

Along with Twitter, those companies make up some of the
biggest holdings in the Global X Social Media ETF, an exchange-traded fund listed on the Nasdaq Stock Market. That security
declined 3.8 percent today, the sixth time in two weeks it has
fallen more than 1 percent. It’s down 21 percent in 2014 after
rising 64 percent last year.

“I’m hearing hedge funds continue to de-risk, mostly in
higher momentum names, which would kind of fit into the mold of
the Twitters, the Facebooks,” Frank Ingarra, head trader at
Greenwich, Connecticut-based NorthCoast Asset Management LLC,
said by phone. The firm oversees $2.2 billion. “It’s just a
rotation right now to more value names and the higher beta names
seem to be beaten up more.”

Alibaba IPO

Yahoo gained 1.2 percent to $36.93 as of 5:32 p.m. in New
York. Alibaba’s market value is estimated at $168 billion,
bigger than 95 percent of the S&P 500 -- and the most valuable
Internet company after Google Inc., according to
data compiled by Bloomberg. The company is looking to sell about
a 12 percent stake, people familiar with the matter have said,
which would make the offering around $20 billion based on the
estimated value.

The IPO will be a boon for Yahoo, which plans to sell part
of its 22.6 percent stake in Alibaba.

David Einhorn, the hedge fund manager who warned of a
bubble in technology stocks two weeks ago, refined his stance by
saying he’s bullish on the industry and that companies including
Apple Inc. look underpriced.

Technology Bubble

“I’d like to clarify Greenlight’s remarks about a new
technology bubble,” Einhorn said today in a conference call
held by Greenlight Capital Re Ltd., the reinsurer where he is
chairman and oversees investments. “In general, we are bullish
on technology and technology stocks.”

U.S. stocks rose yesterday as an expansion in American
service industries offset concern over growth in China and
political tensions in Ukraine. The Dow last week climbed to an
all-time high as earnings topped forecasts and the Federal
Reserve said it would further trim bond purchases as the economy
gains momentum. The S&P 500 briefly climbed above its highest
closing price on May 2, as data showed U.S. payrolls rose the
most since 2012.

The S&P 500 is up 1.1 percent for the year, while the Dow
is down 1.1 percent. The Nasdaq Composite has lost 2.3 percent.

Some 26 S&P 500-listed companies report earnings today. Of
the 406 index members to have released results this season, 75
percent have beaten estimates for profit, while 52 percent have
exceeded projections for revenue.

Earnings Forecast

Profit for members of the equity benchmark probably climbed
4.6 percent in the first quarter from the year-earlier period,
while sales rose 2.8 percent, according to analyst estimates
compiled by Bloomberg.

“It’s not a robust season,” Peter Tuz, who helps manage
more than $450 million as president of Chase Investment Counsel
Corp. in Charlottesville, Virginia, said by phone. “The market
is going to be range bound without a clear trend until economic
statistics point one way or another, and companies’ outlooks
point one way or another.”

The U.S. trade deficit narrowed in March as exports grew by
the most in nine months, pointing to a revival of global demand
that will help the world’s largest economy strengthen. The gap
shrank by 3.6 percent to $40.4 billion from the prior month’s
$41.9 billion, Commerce Department figures showed today.

The Organization for Economic Cooperation and Development
cut its global growth forecast as expansions in China and other
emerging markets slow. The world economy will expand 3.4 percent
this year instead of the 3.6 percent predicted in November, the
Paris-based organization said in a report today.

Ukraine Crisis

Investors continued to watch the situation in Ukraine. The
country’s president named a new commander of the ground forces,
as the death toll rose in the military’s push to regain control
of its easternmost cities from pro-Russian separatists.

French President Francois Hollande said he warned Russian
President Vladimir Putin that Europe would continue to pressure
him to let Ukraine hold a May 25 presidential election and if it
is thwarted, “chaos and a risk of war” would follow.

About 5.9 billion shares changed hands on U.S. exchanges
today, 11 percent below the three-month average. The Chicago
Board Options Exchange Volatility Index, a gauge for U.S. stock
volatility known as the VIX, rose 3.8 percent to 13.80.

Financial shares lost 1.4 percent as a group, the most
among 10 S&P 500 groups. AIG tumbled 4.1 percent to $50.54.
First-quarter net income dropped to $1.61 billion, or $1.09 a
share, from $2.21 billion, or $1.49, a year earlier, the insurer
said after the close of trading yesterday. AIG paid out $1.01 in
claims and expenses for every dollar of premiums it took in
during the quarter. The business had costs of 97.3 cents per
dollar a year earlier.

Discovery Communications Inc. fell 3.9 percent to $74.71.
The owner of educational television channels reported first-quarter revenue of $1.41 billion, missing the average analyst
estimate of $1.43 billion in a Bloomberg survey.

Homebuilders Decline

An S&P index of homebuilders dropped 2.1 percent as all 11
members fell. D.R. Horton Inc. slipped 2.4 percent to $22.43 as
Deutsche Bank AG removed the stock from its short-term buy list.

Energy shares rose 0.1 percent as a group for the only gain
in the S&P 500. EOG Resources Inc. advanced 4.4 percent to
$103.63. The shale driller reported profit excluding some items
of $1.40 a share in the first quarter. Analysts, on average,
estimated $1.19.

Avago Technologies Ltd. added 4.8 percent to $67.34. S&P
said the semiconductor maker will replace LSI Corp. as a member
of the S&P 500 Index, joining the U.S. benchmark gauge after the
close of trading tomorrow.